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Wall Street Journal: Lawmakers Blast Regulators on Foreclosure Problems

November 18, 2010
In The News

By ALAN ZIBEL

House lawmakers scolded federal regulators Thursday, expressing frustration that they failed to investigate problems with foreclosure documents until the issue attracted widespread attention this fall.

Both Democrats and Republicans criticized a panel of regulators at a House subcommittee hearing, especially after officials said their agencies hadn't been paying attention to flaws in foreclosure paperwork until recently.

"I think the American people have a greater expectation that you know it before it happens rather than reacting to it after it happens," said Rep. Randy Neugebauer (R., Texas).

Officials at the Federal Housing Administration, Federal Reserve, the Office of the Comptroller of the Currency and the Federal Housing Administration said their agencies are reviewing industry practices. They pledged to publish reports and potentially issue penalties in the coming months.

Several major lenders, including Bank of America Corp., Wells Fargo & Co., Ally Financial Inc.'s GMAC Mortgage and J.P. Morgan Chase & Co., have been reviewing thousands of foreclosure cases amid revelations they filed large numbers of foreclosure documents without reviewing their contents.

Rep. Maxine Waters, (D., Calif.), noted that problems at mortgage-servicing companies have been widely known for years, citing a news story from two years ago.

"Why is it [that] you don't know how these systems really operate as regulators," Ms. Waters said. "That's the big question among members [of Congress] on both sides of the aisle," she said.

Acting Comptroller of the Currency John Walsh promised to "grind down to the most granular detail" to understand the document problems—and fine mortgage companies if necessary. "we can compel action under the threat of more severe penalties," he said.

David Stevens, commissioner of the Federal Housing Administration, acknowledged that "we have to be much more vigilant with the servicers."